Monday, April 27, 2009

Diving circulation? Raise newspaper prices

Instead of fretting about the all-time record dive in newspaper circulation the last six months, publishers should focus as never before on the quality, not the quantity, of their audience.

That means, among other things, proving the passion and loyalty of their readers by raising the single-copy and home-delivery prices of their daily papers to at least the cost of a venti, double-shot, half-caf soy latte. They go for $3.90 apiece at the local Starbuck’s.

Serious newspaper readers will be glad to pay the price, especially now that nearly all of them have gotten the message that the industry needs their support to continue producing the product they value.

And advertisers of many premium products and services will gain new respect for a medium capable of attracting affluent, well-informed and passionate individuals willing to spare the price of a venti latte for a newspaper.

As proof that premium circulation pricing works, look no further than The Economist, whose single copies sell for the cost of the approximately 1½ venti lattes. Named the top-performing magazine of the year for the last two years by AdWeek, the Economist in 2008 grew ad revenue by 25.5% last year to $131.5 million and boosted its circulation by 9.2% to 786,977.

The Economist’s success in 2008 compares with the average drop of 7.09% in daily newspaper circulation and an average decline of 5.4% in Sunday sales in the six months ended on March 30 that was reported today by the Audit Bureau of Circulations, the industry-funded body. The record 7.09% decrease in daily circulation in the last six months rivals the 8.1% fall in daily circulation in the prior 12 months.

The decline in circulation is long running, accelerating and seemingly irreversible.

The last time daily newspaper circulation increased was in 1984, when it peaked at an average of 63.3 million papers per day. Using ABC numbers and historic data provided by the Newspaper Association of America, it is possible to estimate that daily newspaper circulation today has fallen to 43.8 million copies. Sunday sales now are 44.3 million vs. an all-time high of 62.6 million in 1990.

The last time newspaper circulation was this low was in the mid-1940s, when the population of the United States was half the size that it is today. Today, only 18 out of every 100 adult Americans buys a newspaper. That is less than half the penetration the industry enjoyed in 1945.

Not surprisingly, metro newspapers suffered the steepest declines in the latest circulation reports. Leading the carnage was the New York Post, whose daily sale plummeted a staggering 20.6%. As you can see from the table below (click to enlarge), the Post was followed closely by the Atlanta Journal-Constitution, Newark Star-Ledger, San Francisco Chronicle and several other double-digit losers.

Many of the drops were self-inflicted, as publishers reined in their distribution areas to reduce the high costs of shipping comparatively small numbers of newspapers to distant counties.

Significantly, the Wall Street Journal, which pursues a premium subscription and advertising strategy was the only one of the top 25 papers to show a circulation gain. Comparatively modest circulation declines were reported by New York Times, which sells in my neighborhood for $1.50 (plus tax) during the week and $5 (plus tax) on Sunday.

After years of increasingly accelerating circulation declines, there can be no denying that print newspapers have become niche, not mass, products. This means publishers need to begin marketing them in a different way.

When the traditional newspaper model was to maximize reach by maximizing audience size, it made sense to keep subscription prices as low as possible to be able to charge advertisers the highest possible rate for the largest number of readers.

“I sell bellybuttons,” said my friend Bob McCormick back in the 1980s. He was an ace ad salesman who at one point headed the agency that published the San Francisco newspapers.

But mass quantities of bellybuttons don’t cut it for most advertisers in an age when they can connect rapidly and oh-so-cost-effectively with a prospect on the Internet by offering an ad that appears only when a customer Googles whatever magic words the advertiser has selected.

Best of all, the advertiser pays only when a prospect clicks on a Google keyword ad; the rest of the dozens of times the ad appears, the advertiser doesn’t pay at all.

Printed newspapers can’t compete with Google, of course, because they are unable to offer targeted, interactive advertising. But they can take a cue from successful magazines by targeting their customers geographically, demographically and in other ways.

By charging premium prices to carefully targeted groups for single copies and subscriptions, newspapers will reinforce the value of the product to their customers and re-establish their value to advertisers.

In so doing, the demoralized practitioners struggling with the challenges of the industry also may end up proving the value of the product to themselves.

It's smart to raise prices and it should have been the practice long ago - once again the newspaper industry has been its own worst enemy. One note of caution, however, you paint with a fairly broad brush.There are several of us - small, local dailies, that are still doing well. Best year ever in 2008. And only down about 4 percent this year. Nothing to do with the internet - classifieds still holding strong. Just the economy. And here's a dirty little secret some of our advertisers are passing on to us: they don't think ads work on websites. They understand the value of search. But not display, or any other form of web advertising. They get better results in print, and as the larger newspapers fade - which will happen if they don't stop making their products weaker, opportunities in print will spring up. Newspapers can be as creative as they want to be, but if they continue with the models that we see today, it won't happen. You can't get enough display advertising - that works - on a newspaper's web site to pay the bills. Not if the site is free. And you can't get today's world to go down into a site deeply enough to generate the necessary ad count - and again, it's problematic when the advertiser doesn't think the ads work.

You bring up the Economist and WSJ and in my opinion both of those have a pretty targeted audience. In other words the information you are getting in one of those publications is not a "broad stroke" such as a daily paper. I'd like to see some more information on a city newspaper where a broad stroke is applied.

To the first commenter and in regards that web ads don't work. How are the advertisers measuring success of an ad online and how are they determining the success of a newspaper ad?

Newspapers would be better off putting their shoulder to the wheel and doing what they do best.

However what they do instead is blather rhetoric and threats, and engage in expensive and very risky litigation and participate in a "Cooperative" in the Associated press that is more competitor than anything else.

Men's median wages are the same as in 1973, see p60-235.pdf graph page 19 or so. Women's are what men's were in 1963. Newspapers have supported immigration to keep wages down. Now people can't afford them. Advertising doesn't help an advertiser if customers have the same wages as in 1973.

Information cost and communication cost is heading to zero. Thats the basic driver for restructuring. The question is what is the niche and whether the new product has high enough value to sustain the employee-base.

Is this a joke? The Economist has actual content, and as others point out, targets a specific audience of educated readers. The "newspapers" ought to pay me to read their advertising and propaganda. I wouldn't spend a dime on a "newspaper" if my wife didn't want the coupons.

But I'm all for it. Charge $10 a copy. The faster these useless mouthpieces and apologists for power disappear, the better.

Hard to raise prices when you're cutting pages and reporters and effectively reducing the quality of the product. However, that hasn't stopped a lot of papers from raising prices any way... and, as we saw today, circulation continued to dive.

I think right now might be the worst possible time to raise prices. In this economic environment, you raise it 50 cents and that could be all it takes to make someone think about the newspaper as an expense, and drop it as a way to cut costs.

Unfortunately, I think you're overestimating how much people cherish their newspapers.

A lot of people enjoy the paper, but I'd guess only a small minority are willing to pay much more for it. And when you cut the news section in half, drop their Style section, or - God forbid - take away their cross word puzzles, I think they'd probably begin to question why they're paying for it at all.

All it takes is one letter saying "we're increasing the price" for them to call and cancel.

I think the smarter route is to quietly keep things as close to normal as possible, and keep those autopayments coming...

As a longtime (and now former)print journalist, I cannot, with a few exceptions justify paying any amount of money for the dreck that passes for news today.

Ironically, I canceled delivery of The Plain Dealer today and I see how its circulation has nosedived.

Well, they deserve it. Their coverage reeks of establishment mainstream, they all but stopped covering city neighborhoods after the Press folded in 1982 (and I was a Press employee so call me biased) and their op-ed page is a joke. And the sports section is lame and overly homer. And in a sign of sheer desperation, the PD ran letters to the editor from the online site in the print edition - unattributed. Horrors.

And the local suburban daily, The News-Herald, where I started my career, is now merely a pathetic shadow of its former self. It was one of the best when I worked there - now its a regional joke.

With pages of safe vanilla stories and ads, there simply isn't any compelling reason to buy a paper. I read stories in the PD I read online 24-36 hours before.

It's incredibly sad to see this, but the fault lies in corporate consolidation and the resulting one-size-fits-all journalism that resulted.

Nightclerk, my problem is that I also have been working for newspapers since 1975, and that golden age -- I don't remember it. Maybe it was at the Cleveland Press. I remember mostly newspapers that were run by their publishers' whims, such as Tom Vail, or political beliefs such as the Pulliams or William Loeb, or were seen as shills for the chamber of commerce, such as most Newhouse papers. I remember some papers that were hailed for their outstanding journalism; some, such as the Chicago Daily News, soon died. I remember the continuing catcalls about the San Francisco Chronicle and the fact that working in Neighbors was seen as pergatory. Perhaps you were just luckier than I was.

Alan, you need to yell louder that newspapers are now a niche medium. As such, they need to say, this is who our audience is, this is who we can sell to, and this is who you, the advertiser, can reach. Someone whose view is that newspapers are "propaganda" is not part of that audience. Fine. Goodbye.

Raise print prices? 'fraid not, unless your goal is to drive traffic to the web even faster. I'm a former journalist, have worked for several newspapers, and am still a news junky-- when the Wall Street Journal recently raised the home delivery price, I cancelled my print sub and started reading on my Kindle for about a third the price. And I'm now thinking about getting a web sub instead...

Two comments:1. I have no problem with increased prices -- so long as the newspapers charge a premium for on-line access; They can't charge a premium while giving their product away on the web.2. In fact, all newspapers do each have a unique, targeted audience: their local audience. That's why they should focus their editorial/coverage resources on local news. Remember the maxim: all news is local. That is never more true than today -- which is why the smaller newspapers are doing better than the larger newspapers. Larger newspapers are caught up in the majesty of national news, whether it be from Washington or Wall Street. They should re-focus their attention on their local audiences. If they do it well, their circulation will grown.

There is a big disconnect between what readers think and what the industry thinks. You should be explaining this to them, instead of reinforcing the industry's most deadly delusions.

As the other commenters pointed out, newspapers are in no position to raise prices, with the continual staff and coverage reductions. That's monopoly thinking, and newspapers no longer have a monopoly on news or their readers' trust.

Raising prices will drive away readers, reducing advertising revenues. You should be able to see where that leads.

Charging premium prices is fine, if one gets a premium product like the Economist offers. But what many daily papers are now offering (take a look at the Chicago Trib these days) is not a premium product.

Was just at a local supermarket and got hit up by a metro daily mentioned in your report to return as a subscriber. Honestly, the first thought in my head was that I didn't want to go back to toting bundles of newsprint to the bottom of my driveway every couple of weeks.

My second thought was that the newspaper in question had done a poor job covering my community back when it was fat and had twice the current staff. I was actually surprised to see them shilling near my house because I had assumed they gave up on their outlying areas more than a year ago.

My third thought -- and I'm not joking about this -- was that I don't ever go to their web site so why would I want their print product. When I used to get them I didn't consider them informative or entertaining, they were more of a habit for someone who was a lifelong newspaper reader and a long-time newspaper employee. I kicked the habit during the two-year time frame that they stopped calling to get me to re-up.

The guy at the little stand must have thought I was a crazy 50-year-old man. He sketched out the subscription plans and asked which I would like. I just stood there and stared at him as my mind ticked through the thought-process above and came to the quick conclusion that there is no way I would ever want that newspaper again.

I considered for a moment talking to the man about my reasoning. But he was just a sales guy and was done with me within a tick after I said no. Within three heartbeats he had buttonholed two more people that came through the door. But I can't help but wonder now why he didn't even have a copy of the paper to show people, especially a section with news targeted at their community. Would I have seen the deal differently had he been offering me something I arguably needed or could use?

Just as an aside, I have been experimenting for the last couple of months with avoiding traditional newspaper sites for my daily news intake. CNN, ABC News and BBC provide me with all of the national and international news I need. Only twice have I gone to the New York Times and Washington Post, each time to read some report where they had considerably more depth than anyone else. I'm not sure I would pay for that either.

I continue to subscribe to my metro daily for two reasons: inertia and habit. Its value has declined past the point of being worth even the relatively low subscription price. I know that a rate increase would push me into cancellation, and I'm a member of the ancient demographic that presumably is its core market.

If you have a product that is unique, or even of high quality, increasing the price might be a viable strategy. Absent that, it will do little except reduce the readership to the true believers and die-hards. Probably not enough of them left to keep the business going.

Alan:I don't disagree with you that newspapers could make more circulation revenue by raising prices and losing their least engaged readers. But this presents a problem for advertising. While it would certainly be nice to be able to tell advertisers that your readers are wealthy and highly engaged, one of the main selling points for newspaper advertising now is that newspapers generally have the highest penetration of any media in the local market. Once you no longer have the widest reach, you're going to lose a lot of advertisers looking for scale.

Sorry Alan, but I think you missed the boat on this one. With 35 or more preprinted inserts in my Sunday metro daily, it would cost the paper a fortune for every 1,000 decrease in circulation. And to top it off, they're not really reporting on a whole lot of stuff I haven't already seen online or TV. They need to really focus on local news, something I won't get much of online or on TV.

Also, to the anonymous number 2, you are correct up to a point. Eventually, Craig's List or a copy-cat Craig's List will get to your market too. And, your chain store advertisers will stop advertising with you if they stop making ads for newspapers altogether. It won't matter that you still cover your market. Their marketing has been so centralized that most won't be able to take advantage of what you have to offer.

If publishers raise the price of print, what's next? Hmmm. Looking at geriatric chest beating from the 800'lb gorrilla, (aka the Associated Press) they could always sue you for failing to pay them for their "Hot News"... Because according to them they own the facts.

Increasing the price decreases demand of any product. Or are we ignoring basic economics now?

The Economist and the Wall Street Journal are bought for reasons less like general newspapers and more like special interest magazines. No one subscribes to either of them for basic news. And that's the reason why they aren't moving with the rest of the industry.

If you raise the price, fewer people will subscribe. Doesn't that make the economics of home delivery even more tenuous? And once home delivery does not make sense, then you're looking at an online product only.

Is this the grand plan?

I for one am not willing to concede newspapers are a niche product, at least not in our newspaper market.

They should be cheap and non-niche.

Our home delivery is our main advantage over competitors.

Make the paper smaller if you need to. Make it complement the Web site in a different way. Don't raise the price - $1 seems a price barrier I wouldn't advocate breaking. And don't raise the price at this juncture, in this economy.

My wife and I were daily Atlanta Journal-Constitution readers for 20+ years, up thru early 2009, when the raising of the subscription price and the overall decline in content of the paper combined to a point that it wasn't worth the subscription price to continue home delivery.

While I still haven't found as good a daily source of Georgia news/politics as was available in the AJC, I spend my morning reading time with the online versions of the New York Times and Wall St Journal (both of which are so well done that I'd actually consider paying for daily access). And due to the timeliness of the online versions, my interest in going back to a delivered paper version, possibly with the exception of Sunday, is nil.

Lex Wadelski has it right: Most local newspapers long ago stopped giving readers who might be willing or able to pay a premium price something they don't already get from their subscriptions to The New York Times. The insistence of local editors to reprint column after column of news that their readers get elsewhere remains astounding -- even moreso in the Internet age. What does a local paper filled with AP, NYT and LAT-WP copy really offer the elite reader that that reader isn't seeing elsewhere? Don't editors see all those blue bags on the lawns of their wealthiest neighborhoods?

About Me

Alan D. Mutter is perhaps the only CEO in Silicon Valley who knows how to set type one letter at a time.
Mutter began his career as a newspaper columnist and editor at the Chicago Daily News and later rose to City Editor of the Chicago Sun-Times. In 1984, he became No. 2 editor of the San Francisco Chronicle.
He left the newspaper business in 1988 to join InterMedia Partners, a start-up that became one of the largest cable-TV companies in the U.S.
Mutter was the COO of InterMedia when he moved to Silicon Valley in 1996 to join the first of the three start-up companies he led as CEO.
The companies he headed were a pioneering Internet service provider and two enterprise-software companies.
Mutter now is a consultant specializing in corporate initiatives and new media ventures involving journalism and technology. He ordinarily does not write about clients or subjects that will affect their interests. In the rare event he does, this will be fully disclosed.
Mutter also is on the adjunct faculty of the Graduate School of Journalism at the University of California at Berkeley.